Business Elites

The role of business elites has never been as straightforward in Canadian society as it has in countries with longer histories and more clearly defined class systems. The Canadian "Establishment" (also known as the Economic Elite, Corporate Elite and Business Elite) constitutes a loosely knit group of contenders for economic, political and cultural power. Although its structure and sources of authority are constantly in flux, the members of the group tightly control the country's decision-making processes.

Economic power in Canada has shifted according to the way money has been made, eg, furs, railways, banking, mining, oil, microchips, fast food and financial services. At the same time, Canada's economic centre of gravity has shifted from Montréal to Toronto, where it largely remains, despite some minor movement westward.

The very existence of an Establishment - a cabal of power brokers bent on what Lord Russell called "the production of intended effects" - runs contrary to the traditional notion of Canada as a land of freely accessible opportunities. To reinforce this notion, even the most outspoken power wielders strenuously disavow any mutual benefits derived from their elitist credentials. In fact, they seldom need to conspire among themselves because their interests so seldom conflict.

Most Canadians tend to view the class system - if they think of it at all - as a reference to ways of life or levels of sophistication. The common misconception that everyone belongs to what George Orwell called "the lower-upper-middle class" - a class that can provide its offspring with the advantages of education but not much in the way of inherited wealth or social position - was not challenged until 1965, when John Porter published his monumental Vertical Mosaic, a detailed examination of Canada's power structure in the 1950s.

Porter revealed dramatic inequalities of income and opportunity among Canadians, demonstrating that only about 10% of Canadian families could actually afford the middle-class life-style then considered average. He argued that the corporate elite (only 6.6% of whom were French Canadian) was rooted in 183 dominant corporations that controlled the majority of economic activities. Power was held by a predominantly Anglo-Saxon economic elite of only a few hundred; ethnic origin was virtually as significant in determining membership in the elite in 1951 as it had been in 1885 and 1910.

Porter also demonstrated that the majority of Canadian political leaders were middle class in origin. He wrote, "The upper class doesn't seem attracted to the turbulence of politics and, in any case, the privileges they enjoy are not threatened by the holders of political power. Nor is there any tradition of working-class participation in politics. I think the real problem with Canada is that its political system is ineffective to cope with national problems. It leaves the definition of major goals - and therefore the power - to the corporate elite ... Although it has a class structure peculiar to its own history and geography, Canada is probably not unlike other Western industrial nations in relying heavily on its elite groups to make major decisions and to determine the shape and direction of its development ... Power arises because of the general social need for order. Everyone in society has a set of expectations about how others will behave. Among such ordered relationships are those which grant the right to a few people to make decisions on behalf of the group."

Porter's original thesis was expanded and brought up to date a decade later by Wallace Clement, who concluded that "Canada has been and remains a society controlled by elites. With increasing economic concentration over the past twenty years, the structure has become increasingly closed, thus making it more difficult for those outside the inner circles of power to break through."

Because they have deliberately set themselves apart from the politicians, members of Canada's business elite exercise a mandate virtually bereft of public accountability. Many of the wealthiest individuals escape to offshore tax havens; others lobby strenuously for the protection of their privileges (see Pressure Groups) and, in fact, their efforts have not been unsuccessful. Canada has one of the lowest corporate tax rates of any industrialized country. Although collectively the corporate elite endow universities, preserve landmarks, donate artworks and raise money for appropriate charities, the impulse toward creative generosity is hardly overwhelming; corporate charitable donations account for only 2% of corporate profits.

Canada's Establishment is composed of overlapping rings of power. While no social compact exists, a confederacy of regional elite groupings - loosely knit yet interlocking - comprises a psychological entity. Its members share habits of thought, values and enemies.

Unlike the power of the political and cultural elites, economic power is usually handed down through the generations. Cradled in an Indian summer of extended adolescence, the children of the rich learn early that established family wealth (with its palace guard of legal retainers, chartered accountants and investment counsellors) is not so much for spending on private fripperies as for influencing positions and events.

By the early 1980s the hereditary pews of the business Establishment were filled with a new breed of ambitious crown princes, symbolized by the death of John Angus "Bud" McDougald in 1978 and the capture of his Argus empire by Conrad Black. "Canada is widely assumed to be an egalitarian society, but the extent to which rich men's sons dominated the financial news in the 1970s was absolutely astonishing," Alexander Ross noted in Canadian Business. "It was almost as though control of major portions of the Canadian economy were being passed on, like family memberships in the Granite Club."

Like the charter members of every elite, Canada's decision makers disavow the possession of power even if they value its exercise. They are accustomed to running things, promoting those men (and very occasionally those women) recognized as reliable. Much of this process operates through negative sanctions; the overly ambitious or unsuitable interloper is blocked by invisible but unbreachable barriers. This system of sanctions operates through the exclusive clubs, private schools and other elite institutions that close and open their doors according to sets of unspoken values that can be called Canadian mainly because they cannot properly be described as anything else.

There are certain people who, no matter how many deals they make with Establishment firms, no matter how often they best their competitors, will never be part of its world. They and many others are the victims of the Establishment's most potent weapon: the power to exclude. This ability to withhold favours is most frequently exercised through the "Big Five" chartered banks - the Royal, the Commerce, the Bank of Montreal, the Toronto Dominion and the Bank of Nova Scotia (see Banking). Even during the depths of the recession of the early 1980s, when their own balance sheets looked shaky, the bankers continued to exercise papal control over the Canadian economy.

The executive board meetings of the 5 largest banks represent the greatest source of nongovernmental power in Canada. During these deliberations, personal relationships through which the economic elite consolidates its existence and swells its authority are formed, strengthened and multiplied.

Canada is held together through the influence of a relatively tiny coterie of power wielders, but power is a difficult commodity to isolate in Canadian society. The definition of it as the "ability to compel obedience" is not broad enough to describe how it is exercised in Canada; neither is Max Weber's view of power as "the chance of a man or a group or a number of men to realize their own will in a communal action, even against the resistance of others who are participating in it."

C. Wright Mill's "power elite" theory is not really relevant, because Canada has no significant military industrial complex - no group of centurions sliding in and out of a Pentagon, a state department, a White House or the equivalent of a Ford Foundation or Council on Foreign Relations. There is no cabal comparable to the Pittsburgh Mellons strong enough to control any region, although the McCains and Irvings approach that stature in the closed duchy of NB.

The Canadian business elite is also distinguished by the fact that so much important decision making is exercised by surrogates. Two-thirds of Canada's 100 largest corporations are owned outside the country. Even if local managers exercise apparent autonomy, their authority is not final - they answer to outside boards of directors. The chief executive officers who run these companies must act as colonial administrators. Most, though not all, American companies treat Canada as a slightly backward acreage of their northern sales territories, reflecting the comment by Jacques Maisonrouge, head of the IBM World Trade Corporation, that "for business purposes, the boundaries that separate one nation from another are no more real than that of the equator."

Few members of Canada's business elite have resisted Canada's Americanization. In fact, it may be the only national elite in history that has cheerfully participated in its own demise. The attitude of E.P. Taylor, one of the most successful Canadian enterpreneurs of his day, was typical: "If it weren't for the racial issue in the US and the political problems they have, I would think that the two countries could come together I'm against this trend of trying to reduce American ownership in Canadian companies. I think nature has to take its course."

This let's-surrender-with-profit syndrome has prevented Canada's capitalist class from attaining any clear perspective of itself and its long-term role. Northrop Frye has interpreted this colonial attitude as frostbite on the roots of the Canadian imagination. "Colonialism," he has written, "produces a disease for which I think the best name is prudery. By this I do not mean reticence in sexual matters. I mean the instinct to seek a conventional or commonplace expression of an idea."

Frye's description of the prudery of spirit, the snobbish modesty and the reluctance to take risks characterizes Canada's elite. National power grids of enormous corporations have replaced traditional family control of wealth and power (except in the Maritimes). Many of the most influential men in Canadian cities and towns no longer belong to local power clusters but are instead the ambassadors of large multinational or transnational corporations. Their loyalty to Canada is at best ambivalent; their dollars seek the highest rate of return regardless of the implications that this may have for the country.

Because they believe so implicitly in themselves, most members of the corporate elite are seldom able to distinguish between the public interest and their own. However, for an Establishment to flex its muscles freely requires the kind of compliant political authority Canada has not always elected. The private sector's leaders demand that their parliamentary representatives "maintain investor confidence," ie, laws should be enacted and enforced for the business community's benefit. The business elite believes that the only good government is one willing to grant their efforts unbridled rein. Occasionally this happens - for example, the business-government axis forged during WWII by C.D. Howe.

By the 1980s, the conflict between government and the private sector was growing bitter. The business community reacted to the initiatives of the Trudeau government with self-righteous rage. The federal Liberal Party, determined to find policy initiatives that might maintain them in their accustomed perch of power, abandoned their traditional stance which in the past had allowed them to strike the most marketable balance between elitism and egalitarianism.

Their new mood was reflected in the National Energy Program, designed to restore some of the control of Canada's most vital industry to Canadians (see Energy Policy). The business elite, interpreting such actions as massive interference in the "free" flow of market forces, reacted with outraged threats of exodus, and under the succeeding Mulroney government, these policies were quickly reversed.

Capitalism is concerned above all with the promotion of economic efficiency, but social democracies are concerned with other objectives as well, eg, a more equitable distribution of wealth. With governments less willing to sponsor indiscriminate corporate handouts and businessmen becoming increasingly opposed to satisfying the demands for the expansion of social services, the 2 value systems continued to drift apart. Under Brian Mulroney the tension between Ottawa and the business community was largely diffused.